Sirotzky v. New York Stock Exchange, 02-3240.

• Decision Date: 29 October 2003
• Docket Number: No. 02-3240.,02-3240.
• Parties: Sara SIROTZKY, Plaintiff-Appellant, v. NEW YORK STOCK EXCHANGE and Sanford C. Bernstein & Co., Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

347 F.3d 985

Sara SIROTZKY, Plaintiff-Appellant, v. NEW YORK STOCK EXCHANGE and Sanford C. Bernstein & Co., Inc., Defendants-Appellees.

No. 02-3240.

United States Court of Appeals, Seventh Circuit.

Argued May 21, 2003.

Decided October 29, 2003.

Edward X. Clinton, Jr. (argued), Chicago, IL, for Plaintiff-Appellant.

Julian Solotorovsky, Kelley, Drye & Warren, Michael T. Roumell (argued), Epstein, Becker & Green, Chicago, IL, for Defendant-Appellee.

Before FLAUM, Chief Judge, and POSNER and MANION, Circuit Judges.

POSNER, Circuit Judge.

Sara Sirotzky hired the Bernstein firm to give her investment advice, pursuant to a contract that provided for arbitration under the arbitration rules of the New York Stock Exchange of any dispute arising out of the contract. Sure enough, a dispute arose and Sirotzky invoked arbitration, seeking $242,000 in damages. The arbitrators, after a hearing in Chicago, ruled in Bernstein's favor and ordered Sirotzky as the losing party to pay the New York Stock Exchange $4,800, the NYSE's fee for providing the parties with an arbitral forum. Rather than comply, Sirotzky sued both Bernstein and the Exchange in an Illinois state court, seeking to vacate the arbitrators' decision on the ground that at the arbitration hearing Bernstein had been represented by a lawyer not admitted to practice in Illinois. After the state judge determined that the amount in controversy included the damages that Sirotzky had sought from Bernstein in the arbitration proceeding and not just the amount of the fee that she had been ordered to pay the New York Stock Exchange, Bernstein and the Exchange removed the case to federal district court under 28 U.S.C. § 1441, the plaintiff and defendants being of diverse citizenship and the defendants citizens of a state other than Illinois. (Citizens of the state in which a diversity suit is brought cannot remove. 28 U.S.C. § 1441(b).) The district court ruled that the only amount in controversy was the fee, which was less than the minimum amount required for a diversity suit in federal court, and so he remanded the case to the state court. That court then decided the merits of Sirotzky's suit against her, and her appeal from that decision is pending in the Illinois Appellate Court.

Sirotzky asked the district court to award her the attorney's fees that she had incurred in getting the court to remand her case. The court refused on the ground that the theory on which the defendants had based their removal of the case was, though erroneous, not frivolous. She appeals.

An order remanding a removed case "may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal," 28 U.S.C. § 1447(c), and although the statute does not set forth criteria for the exercise of this authority, the cases are pretty much at one in holding that the plaintiff must show that the remand order was correct (that is, that removal was improper), but need not show that the removal was in bad faith, and that the district court has a broad discretion in deciding whether to award fees. See Garbie v. DaimlerChrysler Corp., 211 F.3d 407, 410 (7th Cir.2000); Tenner v. Zurek, 168 F.3d 328, 329-30 (7th Cir.1999); Suder v. Blue Circle, Inc., 116 F.3d 1351 (10th Cir.1997); Avitts v. Amoco Production Co., 111 F.3d 30, 32 (5th Cir.1997); Stallworth v. Greater Cleveland Regional Transit Authority, 105 F.3d 252, 258 (6th Cir.1997); Mints v. Educational Testing Service, 99 F.3d 1253, 1260-61 (3d Cir.1996); Morris v. Bridgestone/Firestone, Inc., 985 F.2d 238 (6th Cir.1993); Morgan Guaranty Trust Co. v. Republic of Palau, 971 F.2d 917, 923-24 (2d Cir.1992).

Our court has taken the further step of holding that, provided removal was improper, the plaintiff is presumptively entitled to an award of fees, as under standard fee-shifting statutes, such as 42 U.S.C. § 1988. See, besides the Garbie decision cited in the preceding paragraph, Wisconsin v. Hotline Industries, Inc., 236 F.3d 363, 367-68 (7th Cir.2000), and Citizens for a Better Environment v. Steel Co., 230 F.3d 923, 927 (7th Cir.2000). It is true that the normal fee-shifting statute does not entitle a party to an award of attorney's fees merely for prevailing on a preliminary ruling, Hanrahan v. Hampton, 446 U.S. 754, 758-59, 100 S.Ct. 1987, 64 L.Ed.2d 670 (1980) (per curiam); Linda W. v. Indiana Dept. of Education, 200 F.3d 504, 507 (7th Cir.1999), and it is also true that a remand order is preliminary to the decision of the case on the merits; but section 1447(c) expressly authorizes an award of fees for obtaining such an order. Nevertheless, the entitlement is not automatic—the presumption is not irrebuttable—and we do not think the district judge committed an abuse of discretion in denying Sirotzky her fees.

A threshold question, not free from doubt, is whether the district judge was correct to remand the case. (If he was not, Sirotzky cannot get to first base with her claim for an award of fees.) Had Sirotzky told the state court that her only object in seeking to set aside the arbitrators' award was to avoid having to pay the New York Stock Exchange's $4,800 fee, that would have been the amount in controversy and the suit could not have been removed. But she did not do that. Not until the oral argument of her appeal to this court did her lawyer state that his client had no intention of seeking a new arbitration hearing at which she might win the $242,000 that she had sought at the original hearing. The natural and so far as appears the correct assumption until this disclaimer was made—which was long after the removal of Sirotzky's case to the district court—was that she was seeking to set aside the arbitrators' decision in favor of Bernstein so that she could get another shot at the $242,000 that she claimed were the damages caused her by Bernstein's alleged breach of contract. Why else would she bother to sue? To avoid having to pay a paltry $4,800 arbitration fee? Not that $4,800 is paltry in itself, but it is paltry in relation to the expense of litigation, suggesting that more must have been at stake. And why did she also ask the state court to vacate the arbitral award in Bernstein's favor—not an award of damages, but an award stating that Bernstein had no liability—unless she wanted another crack at Bernstein?

If, as is the inescapable inference from the circumstances just recited, Sirotzky changed her mind about seeking a new arbitration only after the case was removed, the remand was improper, St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 291-93, 58 S.Ct. 586, 82 L.Ed. 845 (1938); Chase v. Shop `N Save Warehouse Foods, Inc., 110 F.3d 424, 429 (7th Cir.1997); Shaw v. Dow Brands, Inc., 994 F.2d 364, 366-68 (7th Cir.1993), because federal jurisdiction is determined as of the date of removal. Kanzelberger v. Kanzelberger, 782 F.2d 774, 776-77 (7th Cir.1986); Tillman v. R.J. Reynolds Tobacco, 253 F.3d 1302, 1306 n. 1 (11th Cir.2001); Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir.2001); United Food & Commercial Workers Union, Local 919, AFL-CIO v. CenterMark Properties Meriden Square, Inc., 30 F.3d 298, 301 (2d Cir.1994). But this is provided that the amount in controversy in a suit to set aside an arbitral decision denying relief is the amount of relief sought. And a judgment setting aside the arbitrators' decision would not have put $242,000, or any other amount of money, in Sirotzky's pocket. But if a plaintiff sues for $242,000 in state court, loses, and the case is then removed to federal court, the amount in controversy is still $242,000, though we cannot find a case that says this, doubtless because it is rare, although not unknown, see Decubas v. Norfolk Southern Corp., 683 F.Supp. 259 (M.D.Ga.1988); Heniford v. American Motors Sales Corp., 471 F.Supp. 328 (D.S.C.1979), for a defendant to be able to remove a case after it has already gone to trial, since a defendant has only 30 days after learning of the basis for removal to exercise his right to remove. 28 U.S.C. § 1446(b). At any rate, that is the natural analogy to the present case.

True, two cases at least superficially much like this one—cases on which the district court relied in holding that the amount in controversy was only $4,800 in this case—refused to consider the possible outcome of the arbitration proceeding in determining the amount in controversy in a suit to set aside the arbitrators' award. Baltin v. Alaron Trading Corp., 128 F.3d 1466, 1472-73 (11th Cir.1997); Ford v. Hamilton Investments, Inc., 29 F.3d 255, 259-60 (6th Cir.1994). But in neither case was the plaintiff seeking to reopen the arbitration. Here that was not clear when the case was remanded; on the contrary, it seemed clear that the plaintiff wanted to reopen the arbitration; and the amount in controversy in any new arbitration proceeding that might be conducted after the award in the old one was set aside would be the $242,000 that Sirotzky had sought originally. It is not as if the arbitrators had ruled that even if she could prove a breach of contract, her damages would not exceed the $75,000 minimum amount in controversy required in a diversity case.

Bull HN Information Systems, Inc. v. Hutson, 229 F.3d 321, 329 (1st Cir.2000), supports our conclusion that the amount in controversy in a suit challenging an arbitration award includes the matter at stake in the arbitration, provided the plaintiff is seeking to reopen the arbitration. See also Choice Hotels Int'l, Inc. v. Felizardo, 278 F.Supp.2d 590, 593-94 (D.Md.2003).

Sirotzky argues that the defendants removed the case not because they thought sh...